Online car retailer Cazoo share price (CZOO) has been ripping higher in the past two trading sessions. The underlying exchange operator halted trading multiple times on Thursday. CZOO stock features a tiny float, possibly inviting speculation.
 

Cazoo Shares Surge Amid Speculation

Shares of online car retailer Cazoo (NYSE: CZOO) have surged sharply since midweek, likely driven by speculation surrounding its small float. This price jump prompted multiple trading halts by the New York Stock Exchange on Thursday. Interestingly, the stock's spike appears to lack any clear company-specific news or announcements to explain the movement.

Earlier this month, the U.K.-based company, which aims to simplify the car buying and selling process by bringing it fully online, revealed plans to shift to a marketplace business model. This strategic pivot is intended to harness the power of the Cazoo brand and expand the platform’s reach, particularly in the highly fragmented U.K. used-car market.

In its announcement, Cazoo emphasized that it could facilitate transactions for approximately 13,000 independent car dealers in the U.K. Additionally, the company pointed out that its brand is now among the top five most recognized automotive names in Britain. Since launching in 2019, Cazoo has sold nearly 160,000 cars entirely online.

Despite these positive developments, profitability remains a significant concern. According to Gurufocus, Cazoo posted a trailing 12-month (TTM) loss of $753 million, highlighting the ongoing challenges it faces in becoming a profitable enterprise.
 

Cazoo's Collapse: From Online Car Sales Pioneer to Sports Sponsorship Powerhouse

Cazoo, once hailed as a game-changer in the online car sales space, has quietly informed its shareholders this week that its days may be numbered. The company has filed a notice in London's High Court, signaling its intention to appoint administrators for some of its key subsidiaries, marking the latest chapter in its dramatic decline.

The company’s fall from grace is a sad turn of events, especially for the employees, whose numbers have dwindled significantly. Cazoo earned a strong reputation for customer service and demonstrated that there is indeed demand for buying cars online, having sold 160,000 vehicles since its 2019 launch.

However, its business model led to staggering losses of £700 million in 2022, and a retreat from continental Europe two years ago was just one of many strategic “realignments” that signaled deep trouble. In March, Cazoo revealed it would be winding down its direct inventory sales and shifting to an “online marketplace” model designed to cater to the very car dealers it was originally created to disrupt.

While higher interest rates and a looming UK recession added to the pressure, the biggest beneficiaries of Cazoo’s rapid rise and fall have been sports teams and events. With its heavy spending on marketing, the company became a fixture in sponsorship deals with clubs like Aston Villa and Everton, as well as events across a range of sports, from horse racing to darts, snooker, and cricket. In many ways, Cazoo became a major force in the sports sponsorship world—even as its financial troubles mounted behind the scenes.
 

Cazoo's Struggles Amid Used Car Market Challenges

Cazoo’s goal of achieving profitability by the end of 2023 has not materialized, with the company facing a significant decline in value following its public listing. In January 2023, founder and CEO Alex Chesterman stepped down after the company’s market capitalization plummeted by 97%. Later that year, in September 2023, Cazoo reached a debt-for-equity swap agreement on nearly $630 million in debt, further diluting shareholder value.

As 2024 began, Cazoo’s situation appeared increasingly dire. The company warned that it could run out of funding within the first half of the year and would need urgent investment to avoid bankruptcy. Reports suggested that the company was exploring all potential options, including new funding, a sale, restructuring, or even asset sales, as it teetered on the brink of collapse.

Cazoo's rapid expansion, paired with aggressive marketing and sponsorship spending—such as the £45 million spent on marketing in the first half of 2022—was a key factor in its financial struggles. While it subsequently cut its marketing budget as the issues deepened, the company’s fall from grace also reflects broader challenges within the used car market, which, just a few years ago, seemed to be on a strong growth trajectory.
 

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